Druckenmiller Recommends Betting Against Australian Dollar

Stanley Druckenmiller, who made $1
billion for George Soros as his chief strategist by forcing a
devaluation of the British pound in 1992, said investors should
bet against the Australian dollar.

“We think the Australian dollar will come down and will
come down hard,” Druckenmiller said today at the Sohn
Investment Conference in New York. “It's expensive.”

The Australian and New Zealand dollars have each surged 45
percent against the U.S. dollar since the end of 2008, the
biggest advances among over 150 currencies tracked by Bloomberg.

The Reserve Bank of Australia cut its benchmark interest
rate to a record May 7, driving down a currency that has damaged
manufacturing and boosted unemployment. Governor Glenn Stevens
reduced the overnight cash-rate target by a quarter percentage
point to 2.75 percent, saying in a statement that the Aussie’s
strength “is unusual given the decline in export prices and
interest rates.”

Australia joins global counterparts in embracing record-low
rates in an economy where inflation is contained, mining
spending is predicted to crest, and credit growth remains
subdued. Stevens is aiming to rebalance growth as mining regions
in the north and west thrive and manufacturers in the south and
east struggle.

The Australian dollar fell for a third day, declining 0.2
percent to $1.0170 at 5 p.m. in New York, after reaching a two-month low the previous day.

Record Rates

Druckenmiller said in August 2010 that he was closing his
hedge fund, Duquesne Capital Management LLC, after being worn
down by the stress of trying to maintain one of the best trading
records in the industry while managing an “enormous amount of
capital.”

The U.S., Europe and Japan have cut rates to a record to
stimulate demand. Federal Reserve Chairman Ben S. Bernanke has
kept the key U.S. rate near zero for more than four years, while
European Central Bank President Mario Draghi said policy makers
are ready to cut again after reducing its benchmark to a record
low 0.5 percent last week.

The RBA cash rate’s previous low was 2.89 percent in
January 1960, according to the central bank. Australia, which
hasn’t recorded a current-account surplus since 1975, typically
maintains higher benchmark interest rates than other developed
economies in order to attract capital inflows to offset its
current-account deficit.